Category Archives: young buyers

Ten ways the new mortgage rules will shake up the lending market

THE CANADIAN PRESS

 

Source: The Globe and Mail – SPECIAL TO THE GLOBE AND MAIL

T-minus 76 days and counting until Canada’s banking regulator launches its controversial mortgage stress test. It’ll be squarely aimed at people with heavier debt loads and at least 20 per cent equity – and it will be a tide turner.

Given where Canada’s home prices and debt levels are at, this is easily the most potent mortgage rule change of all time. Here are 10 ways it’s going to shake up Canada’s mortgage market for years to come:

1. It’s like a two-point rate hike: Uninsured borrowers can qualify for a mortgage today at five-year fixed rates as low as 2.97 per cent. In a few months that hurdle will soar to almost 5 per cent. If you’re affected by this, you could need upward of 20 per cent more income to get the same old bank mortgage that you could get today.

2. Quantifying the impact: An OSFI spokesperson refused to say how many borrowers might be affected, calling that data “supervisory information” that is “confidential.” But at least one in six uninsured borrowers could feel the blow based on the Bank of Canada estimates of “riskier borrowers” and predictions from industry economists like Will Dunning. Scores of borrowers will be forced to defer buying, pay higher rates, find a co-borrower and/or put more money down to qualify for a mortgage.

3. Why OSFI did it: Forcing people to prove they can afford much higher rates will substantially increase the quality of borrowers at Canada’s banks. OSFI argues that this will insulate our banking system from economic shocks, and to the extent it’s correct – that’s good news.

4. A leap in non-prime borrowing costs: Many home buyers with above-average debt, relative to income, will resort to much higher-cost lenders who allow more flexible debt ratio limits. At the very least, more will choose longer amortizations (i.e., 30 years instead of 25 years) and take longer to pay down their mortgage. Non-prime lenders will also become pickier. Why? Because they’ll see a flood of formerly “bankable” borrowers getting declined by the Big Six. That could force hundreds of thousands of borrowers into the arms of lenders with the highest rates. If you have a higher debt load, weak credit and/or less provable income, get ready to pay the piper.

5. A safer market or riskier market? The shift to expensive non-prime lenders could boost mortgage carrying costs and overburden many higher-risk borrowers, exacerbating debt and default risk in the non-prime space. “We’re very aware of the potential migration risk [from banks to less regulated lenders],” Banking superintendent Jeremy Rudin told BNN on Tuesday. “It’s not something that would be a positive development.” If rates keep rising, non-prime default rates could spike over time. Albeit, keep in mind, we’re talking a single-digit percentage of borrowers here. The question people will ask is: Does growing debt risk in the non-prime mortgage market, combined with home price risk and a potential drop in employment and consumer spending truly lower banks’ risk?

6. Provincially regulated lenders win: Unless provincial regulators follow OSFI’s lead (if history is a guide, they won’t), it’ll be a bonanza for some credit unions. Many credit unions will still let you get a mortgage based on your actual (contract) rate, instead of the much higher stress-test rate. That means you’ll qualify for a bigger loan – if you want one. We could also see a few non-prime lenders charge lower rates to help people qualify for bigger mortgages, while tacking on a fee to mortgage for that privilege.

7. Trapped renewers: Lenders are thrilled about one thing: customer retention. As many as one in six people renewing their mortgage could be trapped at their existing bank because they can’t pass the stress test at another lender. And if a bank knows you can’t leave, you can bet your boots they’ll use that as leverage to serve up subpar renewal rates.

8. A short-term spurt: Expect a rush of buying in the near term from people who fear they won’t qualify after Jan. 1. The question is, how much of that short-term demand will be offset by people selling, as a result of the rule change’s perceived negative impact. In the medium term – other things equal – this is bearish for Canadian home prices. Period. That said, borrowers will likely adapt within two to five years. And prices will ultimately resume higher.

9. The stress test could change…someday: While few credible sources expect OSFI’s announcement to trigger a housing crash, the higher rates go, the more this will slow housing. Financial markets expect another rate hike by January, with potentially two to four – or more – to come. Mr. Rudin says OSFI may “revisit” the restrictiveness of the stress test if rates surge, but will the regulator act in time to prevent diving home values? That’s the trillion-dollar question. The good news is that rates generally rise with a strengthening economy, which is bullish for housing – for at least a little while.

10. Questions abound: Tuesday’s news will undoubtedly spark contentious debate over whether this was all necessary, given already slowing home prices, provincial rule tightening, rising rates and the fact that uninsured default rates are considerably lower than for people with less than 20 per cent equity.

OSFI says its responsibility is to keep banks safe and sound. Overly concerning itself with the side effects of its mortgage stress test is not its mandate, it claims. Well, in a few years we might be either congratulating OSFI, or asking if that mandate needs to change.

THE CANADIAN PRESS

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New to Canada? Three tips to start your finances off right

New to Canada? Three tips to start your finances off right

Moving to a new country can be overwhelming but starting your finances off right can make all the difference as you build your new life.

 

As you begin your new life in Canada, here are three tips can get you headed in the right direction.

  1. Connect with resources that can help your family get settled.

There can be so much to do when you arrive in Canada—find a home, a job, schools, a bank—it can be hard to know where to start.

Scotiabank’s Newcomer Handbook gives you quick and easy access to things you need to know as you build a new life here. It’s available for free online and includes advice on:

  • 10 Things You Need to Know About Banking in Canada
  • Top 10 Tips for Settling in More Easily
  • Government Information and Assistance
  • Jobs and Careers
  • Health, Safety and Your Rights
  • Education and Training
  • Entrepreneurship
  • Embassies in Canada

After friends and family, a good place to begin when looking for a job is the Service Canada website as well as online job boards. If you need Canadian work experience, consider volunteering in your community.

The federal government also offers other newcomer support, to help get a language assessment and finding a language class, finding a place to live, signing up kids for school and learning about community services.

Your province is responsible for providing services like health care. All Canadian citizens and permanent residents are eligible for public health insurance, which provides most services free of charge (health care in Canada is paid for through taxes). Information about your province’s health care program is available through the government of Canada website.

  1. Learn how to manage your money.

Building a relationship with a financial advisor at a bank in Canada is an important step in creating your new life. Start by visiting your local branch to open chequing and savings accounts and consider applying for a credit card. Your advisor can help you understand your needs and suggest the products that are right for you and your family. Check out the popular credit cards that the Scotiabank StartRightprogram has to offer. With more rewards than any other bank, you’ll be sure to find a card that meets your needs and rewards you in the process.

A credit card not only lets you charge purchases rather than pay cash, it also helps you establish a credit history in Canada. This will be crucial when you need to get a loan to start a business or buy a home. Banks learn a lot about your financial health by accessing your credit history and use it to decide whether they should lend you money.

More important information about credit history:

  • It’s your responsibility to review your credit report and ensure it doesn’t contain any errors
  • Try to pay your bills on time and in full to avoid a negative rating
  • Make sure you understand the terms and conditions
  • Never go over your credit limit
  • Make sure to contact local credit agencies if you need help managing debt
  1. Plan for your future.

Before long, you’ll find that you and your family have settled into your new life in Canada and will start thinking about buying a home or car, putting money aside for your children’s education and investing for your retirement. Having a financial plan is an important element to help you take control of your finances.

One of the first things you can do is evaluate your day-to-day cash flow and think about spending only on things you really need or value. Cutting a few dollars here and there from your daily expenses, even if it’s just $5 a day, can add up to big savings year over year. Where can you start? Cut out your daily luxury coffee, bottles of water, or lunch out once a week. If you saved and invested that daily $5, in 20 years you would have more than $50,000!1

A “Mapping Tomorrow” session with a Scotiabank advisor will go a long way in helping you achieve your unique goals in Canada. Want to learn more? Our expert advisors can offer practical advice and smart solutions to help you have the life you want in Canada.

Source: by Scotiabank  Learn more about Scotiabank’s StartRight Program.

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GTA’s hottest market outside of downtown Toronto

Source: Canadian Real Estate Wealth –  Neil Sharma

Mississauga has become the GTA’s largest condo hub after Toronto, and its torrid pace of residential, infrastructure and amenity development are conspiring to make it ripe for investment.

In tandem with the Places to Grow Act, Mayor Bonnie Crombie has recalibrated the city’s growth plan to quickly turn it into an urban hub. Mississauga’s city centre already has a dazzling skyline, and it’s expecting 23 new mixed-use condominium towers.

Major builders like Daniels, Amacon, Camrost and Solmar all have major projects going up there that promise to bring life to what’s been a sleepy downtown. However, without a crucial piece of infrastructure, some of these developments might never have been conceived.

“The timing is largely a result of the LRT breaking ground next year,” Crombie told CREW. “It is 20-kilometres long with 22 stops, beginning in Port Credit, and then looping around downtown where there will be four stops. It will pull into the transit terminal – the second-biggest in the GTA – then go into Brampton.”

The city centre in Canada’s six-largest city has long been built around Square One Shopping Centre, which just received a major facelift and extension, but there are newer arrivals. Sheridan College has two campuses in or near the city centre, with a third in planning stages, and University of Toronto Mississauga isn’t very far away, either. Apartment buildings in the area are being outnumbered by condos, and students will naturally rent them.
Over the next two decades, Peel Region is expecting 300,000 new residents and 150,000 jobs, of which 60% are projected to be in Mississauga.

Zia Abbas, owner and president of Realty Point, a brokerage that’s grown to 26 franchises in only two years, says the cost per square foot in Mississauga’s condos make investing there a no-brainer.

“The average of any new launch in downtown Toronto is around $1,000 (per square foot),” he said, “with the cheapest I’ve seen in Liberty Village starting around $850 to $900 per square foot before parking. In Mississauga it’s between $640 and $670, parking included.”

Abbas says the LRT will add substantial value to the city centre’s condo cluster, and added that Mississauga has other hot spots too, like Erin Mills and the Hurontario and Eglinton neighbourhood.

“Compared to downtown Toronto where eight out of 10 people rely on transit infrastructure, in Mississauga it’s five out of 10, I’d say.”

But as Crombie’s vision for an urban Mississauga materializes, that number could start rivalling Toronto’s.

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A deeper look at millennial homebuyers

Get to know one of the largest cohorts of future home buyers – and what these clients want in a home.

“When looking for a home, 53% of peak millennial purchasers across Canada are willing to spend up to $350,000, which would typically buy them a 2.5 bedroom, 1.5 bathroom property nationwide, with 1,272 square feet of living space,” Royal LePage said in its latest report. “Yet, with 58% of respondents having a annual household income of less than $69,000, and only 34% currently tracking to have a sufficient down payment of over 20% to qualify for a mortgage in this price range, the actual logistics of homeownership can be quite difficult.”

The report, entitled Largest Cohort of Millennials Changing Canadian Real Estate, Despite Constraints of Affordability and Mortgage Regulation, was based on a cross-Canada survey about Millennials’ sentiments around real estate.

It found only 35% of millennials currently own a home, 50% rent, and 14% live with parents.

The desire to own a home is strong among these Canadians, with Royal LePage’s  survey finding 87% of Canadians aged 25-30 believe home ownerships is a good investment.

However, slightly fewer –69% — hope to own a home in the next five years and only 57% of those surveyed believe they will be able to afford one.

Of those interested in buying a home, 75% would use savings for a down payment; 37% would seek alternative funding as well and 25% plan to rely on family support.

When it comes to housing preference, 61% of respondents prefer to buy a detached home, while a mere 36% believe that is realistic, financially.

The majority (52%) would look to the suburbs when purchasing due to affordability constraints.

“When asked, 64% of peak millennials currently believe that homes in their area are unaffordable, with a significant proportion of respondents in both British Columbia (83%) and Ontario (72%) asserting that prices are simply too high,” Royal LePage said. “Of those that do not believe they will be able to own a home in the next five years, 69% stated that they cannot afford a home in their region or the type of home they want, while roughly a quarter (24%) are unable to qualify for a mortgage.”

Source: Canadian Real Estate Wealth – by Justin da Rosa

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Pros and Cons of Joint Credit Cards

CoupleUsingCreditCard_ImageSource_DigitalVision.jpg

When two people have a joint credit card account, both people can make charges to the credit card and the card’s history is included on both people’s credit report. Both people are also liable for the credit card payments. When the payments become delinquent, the credit card issuer can go after either cardholder for payment.

If you’re thinking about getting a joint credit card with a partner, spouse, or child, knowing the pros and cons will help you decide whether it’s a good idea.

Advantages of Joint Credit Cards

You share a bill. When you and the other person, your spouse for example, have one rent, one electricity bill, one cell phone bill, it seems only natural to share a credit card bill. Having one less bill to pay can let you make the most of your income. Plus, when it’s time to pay off your debt, you’ll have an easier time deciding which card to pay back first.

Help one person get better credit. Adding a spouse or family member with bad credit to your credit card can help them get better credit. But it will only work if the credit card is managed right – the bill is paid on time and the balance is kept low.

Help one person get a credit card/good interest rate where they otherwise wouldn’t. Being added as a joint user might be the only way to get your spouse a credit card, or to get her a low interest rate.

Disadvantages of Having a Joint Credit Card

Both people are legally responsible for making the payments. That means the credit card issuer can take legal action against you for charges you might not have made.

You could even be sued and have your wages garnished.

Credit card disagreements could cause relationship problems. In a 2008 poll conducted for CreditCards.com, 19% of respondents who shared a credit card said they had arguements with the other person about the account. Seven percent said they’d cancelled a shared credit card because it caused relationship problems.

Breakups or divorce make it hard to manage the credit card. No matter what a divorce decree says, the credit card issuer holds you to the original credit card agreement. So if your ex-spouse isn’t paying his or her share of the credit card bills, your credit can stil be affected. It’s even harder to manage the credit card bill if you sever ties with someone you were dating or even a friend or family member.

One person could use the credit card to hurt the other. It sounds childish, but it happens, often after a breakup. One cardholder could go on a revenge spending splurge, leaving the other cardholder with the bill. If the revenge-seeker already has bad credit, she (or he) has nothing to lose from a maxed out credit card or a few more late payments.

Should You Share a Credit Card?

It’s wiser to keep separate credit cards. Before you make the decision to get a joint credit card, evaluate your reasons for sharing a credit card. In the CreditCards.com survey, only 9% of respondents said they felt closer to the person after sharing a credit card.

Similarly, 9% said they felt more in control of the relationship.

Discuss the pros and cons of having a joint credit card. Make sure both people understand the effect a breakup could have on your credit history.

Source: TheBalance.com – Updated September 10, 2016

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How to read your mortgage documents

(Freeimages.com / Evan Earwicker)

A snapshot of typical mortgage documents and a few tips on what to watch out for

Thomas Bruner was a well-informed and financially savvy shopper. Thank goodness. Because his bank made errors in his mortgage documents. Big errors.

It was late 2015 and Bruner and his wife, Leslie, were in the process of selling their North York town-home to move into a larger upper beaches family home in the east end of Toronto. (We’ve changed names to protect privacy.) As a number-cruncher, Bruner knew how important it was to shop around for the best mortgage rate and was delighted to secure a five-year fixed rate of 2.49% with his current bank. To get that rate, he’d shopped around and negotiated hard with the bank representative at his local branch. But when the purchase of the home was closer to being finalized, Bruner was transferred to a bank mortgage specialist. That’s when the problems started.

A meticulous man, Bruner read every word of the 30-page mortgage document—some of it in small, fine print, and other sections bogged down with legal jargon. An hour later, Bruner emerged stunned. His bank had made a mistake. A big mistake. A mistake that added $100s to his monthly payments and tens of thousands in interest over the life of the mortgage.

Instead of 2.49%, they’d calculated his mortgage payments based on a rate of 2.99%. The bank had also changed the rate of payments from biweekly to monthly. If he’d signed the mortgage documents without reading the package, he would’ve paid more than $4,075 in extra interest payment,over the five year term*. That’s no small change. (*Assumes a $450,000 mortgage amortized over 25 years, interest calculated based on a five-year term.)

So, Bruner called the bank’s mortgage specialist. Rather than apologize and amend the error, the mortgage rep tried to argue that this was now the going mortgage rate—the best the bank could offer. Bruner was stunned, yet again. “I argued back,” he recalls, “explaining that we had locked in our rate during the pre-approval process. We were only 40-or-so days into the 90-day rate-hold guarantee.”

Screwed by the bank?

Bruner isn’t the only one to notice problems. According to the Ombudsman for Banking Services and Investments (OBSI), errors made by the banks rank No. 4 in the top 10 reasons for customer complaints. However, when asked for specific statistics on the precise number of complaints lodged, and how many of these complaints directly relate to errors in mortgage documents, an OBSI spokesperson replied that they don’t release this information. Instead, the OBSI offers very pretty spiderweb and sunburst visual representations of customer complaints.

This lack of transparency prompts the question: How many other people have been screwed by a professional working in the real estate market? (Cue the wrath of every bank, mortgage broker, home inspector, insurance agent, realtor and renovator involved in this industry.)

Still, how many of us signed a document only to realize, after the fact, that there was an extra charge? Or found an error that’s in the lender’s favour? While reading every page of every legal document we sign is the smart, prudent thing to do, truth be told very few of us understand all of what’s written in an insurance contract, mortgage document or even a purchase and sale agreement.

To help, here’s a snapshot of typical mortgage documents and a few tips on what to watch out for—keep in mind every lender have their own versions of this document, so this is meant to be illustrative only.

 

To help you process the information, consider the following.

Look for key rates and terms

mortgage documents

The pink arrow points to the mortgage interest rate that you will be charged during the duration of the loan term. Check this. Even a 10 basis point change in the rate can add up over the long haul.

The green arrow points to the length of your amortization, expressed by the number of months. Check this. Some of the biggest mortgage document errors are in how long a loan is amortized for; while a cheaper monthly rate can seem appealing, this sort of error can tack on tens of thousands of extra interest costs over time. Above this amortization rate, is your term length—how long you’re committed to pay this lender, based on the rates and terms you’ve both agreed upon. The line should also state whether you’ve agreed to a fixed, variable or open mortgage. . The type of mortgage you agree to can have serious implications on the penalties you’re charged should you opt to make an extra payment, or break your mortgage agreement. For simplicity sake, a one year mortgage is expressed as 12 months, while a five-year mortgage term is expressed as 60 months and a 25 years amortization is expressed as 300 months.

 

The three numbers in the red box reflect the monthly mortgage rate you will pay (a mixture of principal plus interest), the monthly property tax you will pay to your bank (who will then make a payment on your behalf) and the total amount you will pay based on the addition of these two amounts. If you want to double-check your lender’s math, try Dr. Karl’s Mortgage calculator.

The orange arrow is how frequently you will make payments to your lender. Check this. Not only does payment frequency help reduce the overall interest you end up paying, but to make changes after you’ve signed your document can cost you an out-of-pocket fee.

The yellow arrow is the day you first get your money and the day the interest clock starts ticking. Pay attention to this. Some lenders will charge you a larger amount for the first payment of your mortgage to cover the interest that has accrued from the Advance Date to the day you make a payment against the outstanding loan. Some lenders don’t increase the first payment, but allocate a larger portion of this payment to pay off the outstanding interest. Either way, you want to be clear about what’s being charged, and when.

Don’t forget property taxes

Mortgage documents

Under the property taxes clause you will notice that the monthly sum added to your mortgage payment is an “estimate” based on the lender’s assessment of your annual property taxes. If you don’t want to pay your property tax monthly or you want to amend how much you pay you’ll need to negotiate this with your lender.

Loan prepayment privileges can make or break a penalty

mortgage documents

In recent years, we’ve heard a lot about mortgage penalty fees. You pay these penalties to your lender whenever you break the negotiated terms of your loan contract. If you have an open mortgage, there should be no penalties for pre-payments or to pay-off the entire loan before the end of the negotiated term. If you have a variable-rate mortgage, you will be charged a penalty that’s equivalent to three months of mortgage payments, plus administrative fees. If you have a fixed-rate mortgage, you will be charged a fee that’s calculated using the Interest Rate Differential calculation. This calculation is different for every lender, but it can add up, quickly.

 

Planning a reno? Read the fine print

mortgage documents

Many homebuyers are shocked to learn that they can void their home insurance policy if they undertake home modifications or renovations without first notifying the insurance company and, typically, paying an additional premium. But did you know you can also void your mortgage loan contract—and prompt a lender to recall and cancel the loan—if you obtain a mortgage and don’t disclose intended construction, alterations or renovations to the home? Read your mortgage contract carefully to see exactly what must be disclosed.

Be prepared with documentation

mortgage documents

When reading your mortgage contract the lender will typically list the type of documents you are required to submit in order to verify the information you have provided. This will include pay-stubs, Notice of Assessments for your income tax, as well as additional loan or income verification. But don’t be surprised if your lender follows up with requests for additional documentation. Typically, they cover this off with a broad statement that notifies you that any information they request must be provided. A sample of this type of statement is above, in the red square highlight.

 

Check the accuracy of the payment frequency

mortgage documents

Do you have a plan to pay off your mortgage quickly? Part of that plan may include how often you pay your mortgage—the more frequent the payments, the more you pay and that means paying off the principal faster, which reduces the overall interest you pay for the loan. Every mortgage document will have an area where you can choose the frequency of payments. Be sure to check off your selection, as making change after the document is signed will cost you, as you can see below (in the red circle).

mortgage documents

Administrative fees to open and close a mortgage loan can add up. Ask for an amortization schedule—to verify how much of each payment is going towards the principal and how much is interest—and you’ll need to pay your lender. Want a mortgage statement? Fork out more money. Need to renew, you may be slapped with an additional fee. But the one that can be annoying, even if it is relatively minor, is the “Payment Change Fee” (highlighted in red). If there’s an error in your payment frequency in mortgage document you signed and you phone to make a correction, this lender will slap you with a $50 fee. Not your error, but it is your penalty. To avoid paying unnecessary fees, make sure to check your mortgage documents for inaccuracies.

 

Make sure you have insurance

mortgage documents

Did you buy a home but forget to shop for a home insurance policy? If your mortgage advance date arrives and you still haven’t been able to submit valid home insurance to your lender, expect a fee. For example, this lender charges $200 per month until you can provide evidence of a valid insurance policy for the home.

Other fees are deducted from the loan amount

mortgage documents

Did your lender ask for an appraisal on the home you want to buy? Don’t be surprised if you have to pay for that report (see highlights above). Plus, some lenders who require title insurance will deduct it from the total amount loaned to you; it’s only a few hundred dollars, but it can leave you scratching your head as to why you didn’t get your full mortgage-loan amount.

 

Where to go to complain

mortgage documents

Have questions or concerns about your mortgage documents? In your contract you should see a clause that clearly states how to get in touch with your lender or how to lodge a complaint. If this doesn’t work, and you’ve worked with a mortgage broker, contact the broker directly. They should work on your behalf to sort out any discrepancies with the lender. Finally, if your independent broker isn’t helpful or if you went through a bank to get a loan and you’re not getting anywhere, consider contacting the bank’s ombudsman. This is an independent role within a financial institution that’s tasked with addressing consumer complaints. If this fails, consider lodging a complaint with OBSI. But be warned: It can take up to nine months just to get an answer on a complaint, sometimes longer.

Scan the mortgage snapshot

mortgage documents

Finally, almost all lenders now provide a synopsis of all fees and terms in that back of your loan document. This doesn’t mean you should skip over the body of the document, but this summary is a great spot to start verifying if key terms, such as the mortgage rate and the length of amortization, is accurate. If not, mark it, and go back to your lender. Don’t be afraid to fight for what you agreed to. Bruner wasn’t.

Despite the reluctance by his bank’s mortgage specialist, Bruner eventually got the rate he was initially promised. One key component to his negotiations were the emails he’d kept. The correspondence was evidence of what Bruner was promised and made it hard for the bank to rescind the initial offer.

Source: Money Sense – by   October 31st, 2016

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Beware of ‘transportation mortgage’ when moving to suburbs: planner

Port Mann Bridge

A new analysis of living costs in Metro Vancouver is raising serious doubts about whether opting for a cheaper home in the suburbs actually saves families money.

According to Andy Yan, director of Simon Fraser University’s city program, people who move out to the suburbs can end up spending far more on transportation than their Vancouver neighbours.

Using Statistics Canada data from 2011, Yan calculated that Langley residents will spend $563,755 over 25 years on transportation, while Vancouverites will spend $298,459.

That’s a difference of $265,296 over two-and-a-half decades.

“It’s the transportation mortgage. It’s the possible costs that could be involved in adding transportation toward your housing costs,” Yan said.

Factoring in those amortized transportation costs makes a dramatic difference in the million-dollar line, which separates the area of Metro Vancouver where most single-family homes are worth more than $1 million.

“The million dollar line is now somewhere on the border of New Westminster, Port Moody and Coquitlam,” Yan said.

In Langley, fewer than one per cent of single-family homes currently cost more than $1 million. If you include transportation, however, that number jumps to 73 per cent, according to Yan’s data.

But even if the moves don’t necessarily save much money, some who have headed to the suburbs argue they had few other options.

Jeremy Wee told CTV News he took the increased transportation costs into account when his family decided to move into a townhouse in Pitt Meadows, and they’re very happy with their choices.

“We found beautiful homes – new homes! – that we could actually bid on,” said Wee, who continues to commute into Vancouver.

“I love where I live, and I love where I work.”

Source: CTV Vancouver  Published Wednesday, December 21, 2016

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Four ways parents can help their kids buy a home

A real estate for sale sign is pictured in front of a home in Vancouver, British Columbia on October 4, 2016 (Ben Nelms/The Globe and Mail)

I know that money isn’t everything. But it sure does keep me in touch with my kids. I’m not just “Dad” around the house. I’m the “Bank of Dad.” Regardless of how old your kids are, there’s a good chance they may need a leg up – or a handout – at some point in time.

I’m thinking particularly of young people living in Toronto, Vancouver and a growing number of smaller communities around the country where housing prices have risen significantly. How can a young person possibly afford to buy a home nowadays? It can take many years, even decades, for a young person to save enough for a down payment (check out The Globe and Mail’s down-payment calculator online at http://tgam.ca/EP4W).

I’ve had an increasing number of parents contact me in the past few months asking about the best way to help a child buy a home. Here are some ideas to consider.

1. Make it a starter home.

If you’re going to help a child buy a home, make sure he or she can afford the property taxes, maintenance, mortgage payments and other costs on the place – otherwise you could be writing more cheques later. There’s no point in helping your child buy a home that his or her income can’t support. Even a smaller starter home can get your child into the market and, over the long run, help build equity that could lead to a different place later.

2. Consider a gift to help your child.

If you make a gift of cash to your child to help buy a home there are no negative tax consequences – unless you have to sell some investments at a profit to free up the cash, in which case taxes could be owing on a capital gain.

If your adult child buys a home in her name and lives in the place, then she’ll be able to use her principal residence exemption (PRE) later to shelter any gains from tax. Be aware that if your child is married and then later divorces, the value of your gift could be split between her and her ex-spouse if those dollars were invested in a matrimonial home. Making a gift to your child before she gets married may mean she’s entitled to that value (i.e. it may not have to be split) upon a marriage breakdown – but speak to a family lawyer in your province to confirm the rules where you live.

One last point about gifts: If you’re a U.S. citizen, making a gift to a child can trigger a gift tax liability if the gift is more than $14,000 (U.S.), the 2016 exclusion amount, although you’ll likely be able to avoid any tax hit by using up part of your estate and gift tax exemption (speak to a tax pro).

3. Consider a loan to help your child.

Lending money to your adult child to buy a home might be an even better option. There are no negative tax consequences to lending money for the purpose of buying a home. You’ll maintain some control over the property if you set it up as a mortgage on the home. The mortgage can be interest-bearing, or not, with specified repayment terms, or simply due upon demand.

If your child goes through a divorce, you’ll be entitled to take back the balance of the mortgage outstanding, which can help keep those dollars in your family rather than handing part of that amount to your child’s ex-spouse.

The loan you make does remain an asset of yours, which could be subject to probate fees upon your death in provinces in which those fees are levied (likely to be a small cost on a mortgage loan to your child). As for U.S. citizens, lending money to buy a home will avoid any gift tax issue.

4. Consider gifting the property itself.

One parent told me he wanted to gift a rental property to his daughter for her to own and live in. Transferring a property will be taxed as a disposition at fair market value (FMV) by you. This may be fine if the property hasn’t appreciated in value much, or you can shelter any capital gain using your PRE (which was not possible in the case of this father because he was transferring a rental property). In this case, his daughter will inherit the property with an adjusted cost base equal to the FMV at the time of the transfer, and she should be able to use her own PRE to shelter any gains going forward if she sells.

Source: TIM CESTNICK Special to The Globe and Mail Published Thursday, Oct. 13, 2016 

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Women are more responsible than men when it comes to mortgages

Women, especially those in their 30s, are the most reliable mortgage candidates in Canada, according to Toronto-based author and money coach Lesley-Anne Scorgie.

Scorgie—who wrote three books on fiscal responsibility for young women and couples—stated that a closer look at individual credit scores will reveal that Canadian females are better at fulfilling their mortgage obligations than males.

“Single women have a lower tendency to default than males. It has to do with their psychological make-up. It has to do with risk aversion which women have more of than men,” Scorgie told The Globe and Mail.

Canadian Real Estate Association spokesman Pierre Leduc agreed, adding that while no hard numbers on gender-based spending in Canada exist as of present, CREA transactions point at a significant rise in the number of females participating in the country’s housing markets.

Toronto agent Suzanne Manvell concurred with these points.

“I have worked with many single women, as have many of my colleagues, who are ready, willing and able to purchase on their own,” Manvell said. “Some like the convenience of a condo, others a simple residential home. Some, including myself, have elected to become landlords and are happy in that role and have parlayed their first purchase into a secondary income property.”

Female buyers have been playing an increasingly important role in ensuring the vitality of the housing machinery in North America, observers said.

In the United States alone, single women now account for 15 per cent of all home purchases, according to the 2016 U.S. National Association of Realtors Home Buyer and Seller Generational Trends report.

 

Source: Real Estate Professional – by Ephraim Vecina21 Oct 2016

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High Housing Prices Forcing Young Canadians To Team Up With Friends, Family

MOVING BOXES

TORONTO — When Jeremy Campbell purchased a house in Ladner, B.C., with his sister and her husband in 2010, it was meant to be a temporary arrangement until he could upgrade to a place of his own.

“The initial plan was to do this short term just to get into the market, build some equity … get my foot in the door,” says Campbell, who covered one third of the down payment on a 2,000 square-foot home that’s split into two suites.

But with home prices in the Lower Mainland’s red-hot real estate market soaring, Campbell says they’re thinking of staying put.

“We’ll invest in the house to expand it versus selling and going our separate ways,” says Campbell, noting that a renovation is needed to accommodate the growing family, which now includes his fiancee, their new dog and his three-year-old niece.

Experts say an increasing number of first-time homebuyers are contemplating arrangements like Campbell’s as sky-high prices in markets such as Toronto and Vancouver have eroded affordability.

Young Canadians look to family and friends for housing help

A recent RBC poll found that roughly one in four millennials would consider purchasing a home with a friend — up from only 11.7 per cent the previous year.

The number of young buyers who would consider going in on the purchase with a family member was 24 per cent, up from 14.7 per cent in 2015, the survey said.

“Particularly in some of the larger markets in Canada, affording that first home or condo is increasingly more challenging,” says Erica Nielsen, vice-president of home equity finance at RBC.

In addition to higher prices, premiums for mortgage default insurance have risen, presenting an additional obstacle for first-time buyers, Nielsen adds.

A home for some, an investment for others

The online survey of 2,000 Canadians was conducted by Ipsos on RBC’s behalf between Jan. 28 and Feb. 4. The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

While many co-purchases involve both parties living together in the home, that isn’t always the case.

When Richard Wiebe bought a $340,000 two-storey house in Toronto’s east end with a close friend in 2012, they each paid half of the down payment and agreed to split the cost of all of expenses and any capital gains when they sell.

But only Wiebe lives in the home. For his friend, the transaction is purely an investment.

“I consider him my platonic husband because we own a house together,” quips Wiebe.

“It’s an awesome way to get into the market sooner without having to find ‘The One.”’

“I consider him my platonic husband because we own a house together.” — Richard Wiebe

Experts caution that such arrangements come with risks.

“When you purchase an asset together, it’s basically like starting a business together,” says Chantel Chapman, financial fitness coach at online lender Mogo Finance Technology.

“There are going to be points in time where things might not be amazing, and you need to account for that.”

Chapman recommends working with a lawyer and drafting up a written plan that outlines everything from what happens if one party wants to sell to how the cost of repairs will be split.

“Your name and your credit file is attached to that debt, so if the partner you are purchasing with loses their job or something happens and they can’t make their part of the mortgage payments … that’s going to impact you, as well,” says Chapman.

Source: Canadian Press  By Alexandra Posadzki Posted: 04/26/2016 11:39 am EDT

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